How the ceramics industry is a perfect example of one economic theory

(Source: Reuters)

The European Comission has enacted legislation that will see consumers pay higher prices for ceramics as of Thursday, and many of us probably won't ever realise. The Brussels-based Foreign Trade Association has decided to impose tariffs of 13.1 to 36.1 per cent on Chinese ceramics.

Industry groups - the European Ceramic Industry Association and the European Federation for Table and Ornamental Ware - brought a complaint to the European Union stating that cheap Chinese goods have cost them jobs.

While production of ceramics may be shifting to China, this isn't unfettered bad news. Consumers have been able to enjoy cheaper goods. That these industry lobbyists have managed to get the EU to do their dirty work is a prime example of public choice theory.

Producers of these goods have strong incentives to lobby governments for protectionism. They stand to gain a lot from measures that hamper their competitors. Individual consumers rely less on cheap goods. As such, benefits are centralised, and costs dispersed.

We see this elsewhere too. Often existing owners of homes in a given area will oppose new homes being built. Potential owners of these homes have less to gain - they can't be sure that they will own these planned homes - while existing residents have strong incentives to prevent new builds which they feel will devalue their property.

Lobbyists can get away with this because those who suffer don't co-ordinate well to oppose them. The key is not to give politicians these sort of powers to begin with. Perhaps if firms couldn't get government to crush their competition for them, they could return to trying to produce better products with which to attract consumers.